How long for credit score to imrove?

[HalfPaycut]

I would like to refinance my home but my credit score is too low (680-700) to qualify for the best rates because of my $100K in credit card debts (still current).

I think I can get my hands on about $35K in cash to pay down my credit cards. How long would it take for my credit score to improve once the debt is reduced?

[OhioFiler]

How do you plan to get your hands on $35K cash?

[BornAgain]

I'll guess: From a 401k.

[hamburgervol]

FHA will do a refinance 2 years after a BK. That's probably not the answer you are looking for though. If it were me, I wouldn't take money from a retirement and pay that much cc debt.

[OhioFiler]

Big mistake to cash out a 401k.

Why is refinancing the mortgage your top priority? Are you here because you are exploring BK options? If so, forget the refi and forget the $100K unsecured debt.

I would think a 780 - 800 FICO would get you a pretty good interest rate.

[HalfPaycut]

I have no intention of touching my 401k, especially at its current value.

My wife resigned from her job 3 years ago. She is 41 but can cash out her $55K pension with a 10% penality plus taxes and clear about $35K.

If she waits until 59-1/2, it will be worth $1000 per month for the rest of her life.

I haven't run a financial analysis, but it SEEMS LIKE paying off $35K in credit card debt at 15% now then qualifying for a 4.5% refinance is better than $1000 per month 18 years from now.

My question is:
How long after I pay our CC debt down from $100K to $60K, will there be an improvement in the credit score?

Thanks.

[HalfPaycut]

Response to Ohiofiler

I have $100K in unsecured debt. My wife has $45K in unsecured debt.

I am still current on everything with a credit score around 690. I hope I do not have to file BK but am positioning myself now so that I can make it through a BK as well as possible if I have to. For instance, this knowledge kept me from making a payment to a family member that would have been considered preferential.

In my state the homestead exemption is only $25K. I have $150K in equity. If I can transfer some of my debt to the house it will be less likely to be taken.

I hope to use the home equity to pay down my debts but none of hers. She is unemployed and doesn't need a credit score anyway. Our plan is for her to file only (if necessary) and shed about 1/3 of our combined debt.

I may have to move to another state for work in a year or two so I want to keep for credit score healthy for now to ensure I qualify for a home loan.

Does this plan seem sound?

[OhioFiler]

I have $100K in unsecured debt. My wife has $45K in unsecured debt.

I am still current on everything with a credit score around 690. I hope I do not have to file BK but am positioning myself now so that I can make it through a BK as well as possible if I have to. For instance, this knowledge kept me from making a payment to a family member that would have been considered preferential.

In my state the homestead exemption is only $25K. I have $150K in equity. If I can transfer some of my debt to the house it will be less likely to be taken.

I hope to use the home equity to pay down my debts but none of hers. She is unemployed and doesn't need a credit score anyway. Our plan is for her to file only (if necessary) and shed about 1/3 of our combined debt.

I may have to move to another state for work in a year or two so I want to keep for credit score healthy for now to ensure I qualify for a home loan.

Does this plan seem sound?

You haven't provided enough detail to offer a strong opinion on your situation. Are you certain you have $150K equity in the home? What is your income today? What are your monthly expenses?

You may be a good candidate for a Chapter 13.

I would not mess with a pension. Why pay $20K to access it now?

I would not worry about what-ifs 2 years from now. If you filed BK today, your FICO score could well be the same in 2 years as it is today.

[HalfPaycut]

Yes I am certain about the equity. I had an appraisal.

I don't see the benefit of filing BK13 if I can do negotiate a debt settlement after the refinance (as long as I qualify as insolvent and don't incur income taxes). I assume debt settlement is less damaging to a credit score than BK13. Am I right?

I believe I qualify for BK7 based on the means test but would lose the house if I did. I don't want my kids to lose their house.

[hamburgervol]

Yes I am certain about the equity. I had an appraisal.

I don't see the benefit of filing BK13 if I can do negotiate a debt settlement after the refinance (as long as I qualify as insolvent and don't incur income taxes). I assume debt settlement is less damaging to a credit score than BK13. Am I right?

I believe I qualify for BK7 based on the means test but would lose the house if I did. I don't want my kids to lose their house.

Just curious, why would you lose your house? Can you you not reaffirm it? Have you spoken with a lawyer about it?

[HalfPaycut]

I assumed that if I filed CH7 and would have more than $25K equity (Tennessee) after it was sold, it will be taken. Is this not true?

[BornAgain]

I have no intention of touching my 401k, especially at its current value.

My wife resigned from her job 3 years ago. She is 41 but can cash out her $55K pension with a 10% penality plus taxes and clear about $35K.

Okay, not your pension -- her pension. ;)

I think that you'd be trading a bird in the hand for a different bird in the hand and a looser grip as well.